China’s policy makers reached a consensus at an executive meeting of the State Council at end- March on increasing imports. According to the meeting, China will adopt a number of policies to boost the country’s imports and improve its trade balance.

The meeting, chaired by Premier Wen Jiabao, calls for an optimization of the import structure while stressing the necessity of appropriately increasing imports. To optimize the import structure, China will stabilize and guide the import of bulk commodities, raw materials and energy, actively encourage the import of advanced technologies and equipment as well as key components and parts and increase imports of appropriate consumer goods.

Policies and measures that will be adopted to boost imports include:

  • Cutting import duties for some commodities. By means of implementing temporary tariffs rates, China will lower the import taxes for some energy and raw materials and all primary energy and raw materials, in addition to several high-tech goods.
  • Offering diversified financing facility. Banks and insurers are encouraged to provide products and services such as offering import credit to finance imports of high-tech goods, energy and raw materials.
  • Enhancing trade facilitation through improving the efficiency of customs clearance and speeding up the use of digital import clearances.
  • Removing unreasonable restrictions and measures on imports to lower import costs.

As Chinese imports of metals are expected to rise despite a slowing of real domestic consumption in the face of a slow down in economic growth.

In practice, there is little room for a cut in import duty for metals and ores since most of the base metals and their ores already enjoy a zero tariff. However, it is likely that domestic firms, in addition to wider access to bank loans, may also win government subsidies for importing commodities and raw materials.

It is also possible that imports of metals by government agencies (SRB), especially those in short supply such as copper will increase in the future.

The policy partly explains why Chinese imports of metals were strong in the past few months when domestic demand actually had showed signs of moderating. In the first two months of this year, refined copper imports surged 76.2% over the same period last year, primary aluminium imports rocketed by 136.9%, and refined zinc imports increased 73.1%.

Many industry analysts have predicted that Chinese imports, after experiencing several months of strong growth, would fall on mounting inventories and easing demand at home, and unfavourable SHFE/LME arbitrage of these metals.

Source: China Metals e-mail